TORONTO (Reuters) - Whoever wins Canada’s May 2 election faces an “enormous problem” in funding the country’s public healthcare system and will have to make tough choices to keep it ticking, former Bank of Canada chief David Dodge said on Wednesday.
Dodge, co-author of a study on the system published by the market-friendly C.D. Howe Institute, said Canadian healthcare spending will rise to 19 percent of gross domestic product in 2031 from 12 percent in 2009 if it keeps growing at its current pace.
That will force Canadians to consider sharp cuts in other public services, higher taxes, more private spending to keep the system going, as well as a degradation of public healthcare standards, the report said.
“None of them are very easy...the reason we did this (study) is because unless we get on with thinking about it and beginning to make those decisions, then we’re going to run into real trouble,” Dodge told Reuters after presenting the report.
“The default option is what we did in the early ‘90s and what we did in the early ‘80s and we know that doesn’t work. It’s the one option that will not work...just cutting without doing anything else.”
Dodge was a federal deputy minister of health before becoming governor of the Bank of Canada.
Dodge said he sees nothing wrong with explicit healthcare premiums, already adopted by several provinces including Ontario, British Columbia and Quebec.
The goods and services tax might also need to be increased to cover rising costs, he said. ”The GST would be a sensible (choice) because it’s based on how much you take out of production, not on how much you put into production.
“You could have the federal government levy two points of GST and distribute it on a per capita basis, but only to the extent that health care spending is actually rising.”
Opinion polls show healthcare is a top concern for voters ahead of the federal election. But the campaign has so far included little debate on how to tackle rising costs.
“Whoever gets elected federally and whoever will be elected in the provincial governments faces an enormous problem,” Dodge said.
“We have to discuss it like adults, not like children in the play yard screaming at one another.”
Healthcare in Canada is delivered through a publicly funded system, which covers all “medically necessary” hospital and physician care and curbs the role of private medicine.
Healthcare spending has been rising about 6 percent a year under a deal that added C$41.3 billion ($43 billion) of federal funding over 10 years. But the deal between the federal and provincial governments expires in 2014, and Ottawa is unlikely to be as generous in the future as it deals with slower growth.
In 2010, total national spending on healthcare was expected to reach C$191.6 billion, up an estimated 5.2 percent, since 2009, according to Canada’s Institute for Health Information.
Provinces have tried to curb the rate of spending growth while weighing new sources of funding, including means-testing and moving toward evidence-based and pay-for-performance models.
Ontario, Canada’s most populous province, kicked off a fierce battle with drug companies and pharmacies last year when it said it would halve generic drug prices and eliminate “incentive fees” to generic drug manufacturers.
Other problems include trying to control salaries for top hospital executives and doctors and rein in spiraling costs for new medical technologies.
Change may come slowly. Universal healthcare is considered central to Canada’s national identity, and decisions are made as much on politics as economics.
The study said its base case envisaged annual spending per capita rising to C$10,700 in 2031 from C$4,900 per head in 2009, taking inflation into account.
Additional reporting by Louise Egan; editing by Peter Galloway